Q&A Forum

Credit Card Policy for Employees

Hi All, I currently work in a small business. Recently, due to rapid growth of a company, we started hiring couple of new employees. Initially, we never had a credit card policy. Since, the numbers of employees were really small it was easy to track transactions. Now, we have decided to implement credit card policy for all the employees. Any suggestions or samples for policy would be really helpful. Thanks!

Either way, you can use any of the plethora of excellent products to capture expenses, which can read the individuals AMEX card and populate their expense reports.

The only real way is to create a clear and unambiguous T & E policy on what is and isn't permissible, pre-approval for expenses that will probably go over those limits and when a report is due. This policy should be signed by the card recipient and be reviewed by the GC, since it will be a contract.

Lastly, I don't like have corporate credit cards that leave the company guaranteeing the balance; have the employee take the responsibility. This also stops personal spending on the corporate card.

When I worked in Employee AR for a large corporation I would book the credit card charges to their AR account as due to the company then it was up to the employee to submit expense reports to prove their expenditures. Each CC was issued in the employee names

Hi Wayne, do you have any specific/critical expense policy in mind as we do have corporate card policy and i witness issues in dealing with it. My main issue is with flight booking cost. For example, in NYC there are three airports and individual's preferred airline. after a month of expense (typically when employee submits the expense statement), it is hard to validate if employee opted by the best fare available?

I travel a fair amount these days, and prices keep changing, sometimes in only a few hours.

You can always develop a policy that acknowledges that people like certain airlines but the cost can't be over x% of the [low/average] cost for the day the booking is made. How can you tell the what that number is? Require your employees to include a printout from a Google search (like I did JFK to Paris for 7/17 - 7/24. All the prices were with a couple of dollars of each other. Sometimes there is great variation.

Also, since I live in NY, I typically fly out of JFK, LGA when I either can't get a flight out of JFK or its really cheaper (which I have yet to figure that one out) and out of sheer desperation Newark. I also have MacArthur as a possible alternative, but have never even checked out flights.

The policy also needs to include upgrades (business, 1st class, comfort, wifi, etc.).

Also, sometimes flying in a day or so early/staying an extra night or two can save significant amounts of money, even when you adjust for hotel/car rental. Based on your vacation/comp time policy you might encourage mini-vacations.

The only real way to control travel prices is to use a travel agency and require employees to use that agency for airfare, hotel and rental cars. This could actually be to your benefit because professional travel agencies have access to all sorts of tools to find the lowest rates for these main travel categories. If you are using AMEX cards, you should look into their travel agency. I have used them in the past and found that they are very helpful and they can help you analyze your travel dollars to get group discounts from airlines, hotels and rental car companies.

Other benefits of using a travel agency are:
1) A good agency will help you locate your travelers if there is some type of national or local emergency (i.e. 9-11 type occurrence.)
2) They can track unused tickets for credit to future trips.
3) They typically offer some type of travel insurance and accident insurance as part of their service.
4) AMEX has a foreign traveler insurance that covers medical emergencies that occur when traveling outside of the country of residence.
5) Sometimes, their agreements with airlines allow for changing travel plans without a penalty or fee.
6) The only way an airline, hotel or rental car company will negotiate with you for group rates is if you run your expenses through a travel agency. There is a database that travel agencies report to, and that is the gold standard in "proving" how much travel spend you have.

Your policy should be very clear and concise on your expectations on their spending behavior and what is reimbursable. It should also be very specific on the types of expenses that are not allowed on the card, such as personal purchase.

Wayne, your point is well taken on the issue of Travel Agency fees. I think in the long run, a small fee is actually going to save you money given the other advantages (tracking of credits, no change fees, group discounts etc) that you potential get with a travel agency.

I suggest that the employee is the owner of the credit card. He or she will do the monthly payment. In order to get the payment back the employee needs to submit an expenses claim form, which needs to be approved according to the company policies, and very important by a superior of the employee. It is important that when the employee travels with the superior, the payments with the credit card are done by the superior. This in order to have the superior of the superior to approve the expense claim

Working for a small company as well that doesn't issue cards except for already approved uses, I can say that what I would not want to lose control over is whether or not the usage was approved. By not giving out a card unless it is already approved, I can retain that control. However, once growth occurs to the point where you can't simply hand out a payment method for an already approved purchase, you now can't allow a policy that will let someone else determine if the cost was approved. It would seem that things like travel, unless you work for a big company, you could still retain that control. For smaller items, T&E for salesmen for example, you will probably feel that control slip away. It would seem that a daily, weekly, or monthly budget would allow them to buy whatever hotel they want to as long as they don't spend over X dollars and are on the road as much as you expect them to be. Another good way mentioned above is to let them make the charge decision, but set up a system of review where they spend the money on their own card, but get reimbursed through an expense sheet that has to be reviewed. You wouldn't be able to prevent a bad purchase, but you would give yourself a chance to catch that it occurred and take action as a result of it.

One option you may want to explore is the commercial card platforms that most large national banks and now some regional banks are offering. I have dealt with the Wells Fargo platform in the past and looked at several others when making the "buy" decision. These platforms create transparency for the users and an excellent web based monitoring system for management. There is also no risk for the employer as if their is fraudulent usage by the card holder (e.g. disgruntled employee goes out and buys a car on the commercial card and then quits) as the bank utilizes their internal fraud dept to pursue, so the employer does not have to. The system can be set up to constrain the card holder to what ever extent the employer deems necessary both at the system-wide and the individual card holder levels. These constraints can be modified on the fly by the system administrator so the constraints can be as flexible and nimble as the employer deems necessary. The monitoring and monthly approval is done by the cardholder's assigned reviewer so the user is less likely to misuse the card as their reviewer can access the cardholder's transactions 7/24 as the data is on the bank's system, not the employer's.

Lots of good input above
I do concur that while I tend to personally avoid travel agencies because of the vagaries of my travel...tends to be multi-city-variable based on rates...travel agencies do a world of good.
Caution about having company cards; this can go very, very badly. Do you hand out blank checks to employees? Probably not. Cards go in the same bucket, with debit cards being the worst of the lot by far.
One approach that I like is that everyone gets a *personal* card that is underwritten by the company. This solves personal credit hassles and makes the link to internal systems easier. Keep the limits modest, and generally it only gets used for meals and taxis and such. Big ticket stuff is handled by the travel agency (who gets paid by the hotel, etc) The individual is still responsible for paying the card and clearing out the expenses (approvals, etc). One really cool thing is that this drives the employee to submit their expense reports immediately, lest they wind up loaning the company money.

Anonymous

(Senior Director of Finance)
| Jun 8, 2015

Hi, does anyone have any additional opinion or experience of staff using PERSONAL credit cards for major business purchaes? We have Corp AMEX and T&E policy, but individuals may opt to use personal cards for non-travel vendor purchases for "points". I'm uncomfortable with this, but it has been the culture for years. And as long as my AP staff does the additional check to confirm the vendor hadn't been paid otherwise, it's "OK".
Thoughts?

Yes, from both directions. I recall doing a sale to a major defense contractor, that since their purchasing department had a 3-month turnaround (or something insane like that) with "DFARS", flowdowns, and all the other stuff they do...they just put the 6-figure purchase onto a credit card (we used PayPal...it took a *ton* of transactions due to the maxes in the system). That was mostly valid since we had a PO, Ts and Cs mostly negotiated, etc...

...but this is more an example of a broken purchasing system (on their part) rather than a good process.

Things you want to watch for:
-Having an ironclad policy, with limits. Some things (like the above) should go through purchasing so that you get your ts and c's in line.
-Falling into the "deemed approval" trap, where if you don't have good controls, even for the simple / regular stuff, you could be liable for employee malfeasance (or dumb mistakes).
-Requiring documentation. Both purchase documentation (acceptance of your terms, notification of theirs) and receipts. See elsewhere for the tax stuff. Failure here means either it becomes income for the employee, or a non-deductable exp for you. Maybe both, and suddenly the whatever costs you a staggering amount. Not to mention if you're dealing with an ITAR purchase, one that requires cross-indemnification, etc.

You also note the AP process. This is a good catch, and a big hole. It gets back to process. One solution is to have a normal PO process, but instead of cutting a check, you pay by card. I ran that one for my department (in a smaller company) some time in the past. Great care must be taken as to the personality / role of the person with access, but if you're willing to accept the liability, it is like using employee credit to get short term cash float for the company...and the employee gets a boost to their credit rating with all the transactions on their cards. Poorly done, and it can be a big risk (multi-pay being one, but see the other gotchas in this thread).

Well done, however, it *can* be a good thing. Just don't blanket the company with "yes, go ahead, and inform us later". That would be irresponsible.

We have multiple employees travelling and large expense items such as airfares and accommodation need to go through the in-house travel organiser who uses a travel management company. That way, 'best fare of the day' can be enforced although exceptions can also be made to accommodate (say) a lack of flights. We also allow a 'buffer' of $40 between best fare of the day and a 'preferred' airline if they collect frequent flyer points, and we often pay the annual fee for airline lounges too. After all, travelling and being away from your family can be stressful, if we can 'give a little' we do, we aren't completely heartless. However, we don't issue company cards anymore, personnel are required to use their own credit cards. This seems to keep them motivated to reconcile their expenses and the company obligates itself to reimburse within 7 days of the claim being lodged to ensure that any interest free period breach is not the company's fault.

Very exciting reading and lot's of great advise. What you need is to look at the full end to end travel booking and expense process of which credit cards are just one element. This approach will answer all your questions and provide relevant solutions eventually a Travel Policy. Then you are in perfect shape for your further expansion. Very happy to discuss offline if you are interested to look into this in more detail.

Find the State of California employee credit card policy online - this is a good start for policy development. It is probably more restrictive than you want, but can be easily reduced/modified. There are numerous other examples online. Incorporate your policy into your Employee Expense Reimbursement manual.
A corporate credit card allows restriction of certain merchants or merchant types via their MCC (merchant category code). This can be done by employee which greatly enhances the type of employee spending. Utilize the bank's reporting - there are numerous valuable reports that allow solid oversight.
Other controls can include as a signed employee agreement for pay deduction of improper charges, relevant training prior to receiving a card (make it interesting!), supervisory AND accounting reviews/approvals, and random audits provide additional peace of mind.

Lots of good input here. I'm in agreement with those who dislike corporate cards but have also found that personal cards have limitations. Some employees have bad credit or have other reasons for not being able to obtain cards or have low limits. Others travel so much they can end up at or near their credit limits or if reimbursements are delayed they can be out-of-pocket significant amounts. To cover these situations having a corporate card that a travel agent can charge air fare and large hotel stays to and a limited number of corporate backed cards (Keith suggested both of these above). Finally, there can be occasional non-travel expenses for which a corporate card is useful. This can be held by the President or a trusted admin person.
On the subject of travel agents: though they can help enforce travel policies and provide reporting on overall travel spend, I've found it's not foolproof. In a small company, I'd lean to trusting employees to shop around. As people have noted above, travel can be stressful so I favor allowing them some leeway including keeping miles and favoring certain arilines/hotel chains within reason.

Why would I give an "employee with bad credit" access to my corporate credit?

In my experience, people who have difficulty managing their personal finances tend to be that way forever and have repetitive problems. And, like the drowning man, will pull you down with them if you aren't careful.

I have our one and only, Corporate AMEX card. It's in my name sadly. Our AP department keeps it and uses it for the kinds of large purchases like air fares and hotel reservations. It keeps us closer to those kinds of activities that are prone to abuse/mismanagement for control purposes. And, it keeps employees from having to fork over from their own sources and apply for reimbursement.

We take care of lodging and transportation via this AMEX line. We issue per diem checks for ME&I using federal guidelines for everything else. That keeps T&E pretty simple and well controlled.

There is still material abuse of this perq. But that is from board members and our ill informed CEO so there is nothing I can do about it, though I've tried. However, one of these days, a slighted employee in my AP department is going to go whistle blower to some regulatory agency or the Grand Jury, and things are going to hit the fan. For this reason, I stay away from the issue and don't sign anything related to T&E. :-(

One thing we see from a lot of customers - Finance inherits company cards and can't get rid of them. Often, CEO gets a corporate card early on and gives a few out to early employees and departments before hiring a mid- to senior-level Finance person. They can hopefully stop additional cards but existing cards are grandfathered in and they have to manage the 5 to 10 cards on that existing account. What they can do is automate the process to make it easy for the cardholders to provide the necessary info (i.e. receipts and account coding) so they can at least reconcile the monthly statement, have necessary backup, and get the data automatically into the accounting system.

My experience which i haven't seen listed yet. With today's tools and functionality I subscribe to bringing back in house.

A) Travel Agencies - some travel agencies have claimed to rely on an internal system and therefore have limitations to visibility to online fares and the online system leads them to choose fares that have the greater margin for the travel agency through annual incentives. I would insist on them having access to all online fares and basing markup on the online fares.

B) Travel Agency Alternative - in a small company with minimal travel - have a clerk book all airfare and hotels on company cards. 1) Reduces time spent by higher paid employees booking travel which is a waste of money. 2) controls lowest cost. 3) controls what goes on cards making corporate sponsored cards an option. 4) ensures travel policies are followed. 5) improves the rate of flights that are booked in advance. 6) avoids travel agency pitfalls 7) controls what is spent on cards 8) visibility to cancellations and rebookings 9) able to take advantage of on line fares. There would be exceptions where employees would have to manage last minute changes directly after operating hours.

Michael, I respectfully disagree w/delegating expense-report preparation to clerks. It's best for those who incurred the charges to prepare and submit their own reimbursement requests. They need to set the example.

Start with this: Few employees will ever spend someone else's money as carefully as they spend their own. The best thing is for employees to use their own credit cards and get reimbursed. However, that may not work because some employees might not be able to get a credit card, while others may be carrying balances. In the latter case, adding company expenses increases their interest charge, even if they are reimbursed promptly (which they must be if employees are to use their own plastic).

Probably the best way to go with company credit cards in individuals' names. The Company is on the hook for the charges, no matter what. But--and this is a big deal--all receipts must be turned in timely on expense reports AND must comply with documentation requirements issued by the Company. If an employee fails to turn in a receipt, subtract that amount from her/his paycheck. Keep doing that until the employee feels enough economic pain to change here/his ways. Also, set a single-transaction limit whereby a charge in excess of $X - you determine what X equals--produces an immediate e-mail notification to you or the CFO that a major charge has occurred and from whose corporate credit card.

In the worst case--and this happened once with one of our clients--refer employees who cannot or will not produce their receipts timely, including proper documentation, to credit-counseling services that will help them learn how to manage their money. In the situation w/one of our clients, the employee in question (a Sr. V.P., incidentally) either was incapable of learning how to manage his money, or didn't want to learn. It eventually cost him the CEO's job in a company with revenues > $50 million. He later resigned to tale a job elsewhere. He never got the top job there or anywhere else.

I want to revive this thread and play DEVIL'S ADVOCATE / COUNTERPOINT to the general theme of responses/comments. It is an amalgamation of several points I have read in the thread....so bear with me.

1. Why do you have an employee you don't trust and NOT treated as a professional adult? How is this a good company culture? What does this SAY about your company culture?
2. Are we misplacing the blame on the "company credit card" (policy) rather than on the quality of people we have? To a certain extent, if someone abuses the vacation leave, do we eliminate vacation leaves?
3. Why do you NOT give the resources to the employee for him to function (do his job) efficiently? Would you give him cash?
4. Would you routinely allow an employee to use company credit card (or ANY company resources) and then have yourself reimbursed? If not, why the onerous standard?
5. Major point ---> Do employees OWE the company the use of THEIR credit cards for the company's convenience? Would YOU pay the employee for the use of their credit card/limit? If the employee misses a flight to an important sales meeting because he does NOT want to his his credit card and the company is unable to help him, what are your recourse to the employee?
6. And lastly, is there any difference between the risk of having C-level executives having company credit cards and lower level employees having company credit cards?

Some good questions, but a lot of it is tied to a) culture of the company/industry (and believe me, I've been in industries where no matter how highly paid an employee is, they just spend like drunken fools when it's on the company dime).

As referenced above, professional and responsibilities may not be synonymous. The same can hold true for C-level employees. One would assume they'd be different, but you know what happens when you assume....

I don't see point 5 as being germaine. If an employee doesn't/can't/etc use their credit card, some one in finance/accounting does/can and almost all the expenses can be pre-paid.

However, that being said, if the employee needs to rent a rental car, no matter if its pre-paid or not, they will need to have a credit card.

Considering that many employers are already requiring credit checks.... On the flip side, would you necessarily hire an employee who traveled without a drivers license? (last client some of the board took cabs to and from airport @$100 price tag. Car Rental would have been $30.)

And some positions would require some level of sophistication of personal finances, just as they require education and experience. I do not see it as an outrageous requirement.

It was a rhetorical question aimed to highlight (to what I think is) the absurdity of having a policy of using employee personal credit cards to charge company expenses.

Here are additional points I wanted to make:
1. Employees are under NO OBLIGATION to let the company use their personal credit cards (or have one) for the company's convenience.
2. Employees have every right to refuse being issued a company card that makes them co-liable for company expenses.
3. Companies have the responsibility to provide employees the resources to do their jobs efficiently.
4. Companies should make policies to provide the employee with the necessary resources with #1,2 and 3 in mind and with the necessary flexibility to accomplish their jobs. There should be NO expectation for #s 1 and 2 from the company.

What used to be an accommodation (by the employee) to let the company used their credit cards has turned into an employee responsibility. Remember, the risk goes BOTH WAYS.

And yes, to me it is ABSURD to make credit cards as an employment requirement. It is NOT even the same as a DL (to be used in the job...say drivers). And yes, I would hire employees that do NOT have a DL if their primary work is not driving. Your example highlights what's wrong with policy (restrictions / guidelines) more so culture/people and NOT the need or not need for credit cards nor DLs.

My point is this. If one is hesitant to issue corporate credit cards because one does not trust employees or abuse, FINE! That is OK! But do NOT transfer the "risk" to the employees and expect them or "force" them to use their personal credit cards for company expenses. The company should (or should be able to) write policies and give the resources the employee needs to do his job WITHOUT infringing in his "personal space/items".

We disagree on the DL (even if the job is not driving) and the CC as a "requirement" when the job entails travelling.

Companies buy or subsidize phones and plans. Hence the question in my earlier post, "are you willing to pay for the use of the employee personal credit card/limit?"...a convenience fee if you will. The co-liability cards are pretty much the same.....the RISK GOES BOTH WAYS!

To me (emphasis) it is wrong to require an employee to buy or have a cell phone (or use of any other personal resources) so that the company can use it.

You can do it, you can and will get away with it. But to me it is ethically wrong.

I do not know about you but, I personally will NOT allow a client to ROUTINELY use (as a client policy) my own personal credit card/limit for their company use.

I understand your point, as employees should really be given the means to do their jobs, but I also understand where Wayne is coming from, having witnessed myself along my whole career that the majority of high-level employees who are being given corporate credit cards abuse the system and get away with feeling entitled they can spend irresponsibly.

So yes, it does say something about the corporate culture at the higher echelons, but unfortunately it's more the norm than the exception. Let's get real, and politically incorrect if we have to: only the most ethical C-suite or VP-level employee will spend company's money responsibly! So why should the company do the "ethical thing" if those employees don't? Furthermore, their job is to make the company profitable by saving money, not spending it in lavish T&E expenses.

On the contrary, I've seen much fewer low and mid-level employees abusing the system, because they are actually proud to be entrusted with a corporate card and their salaries are too low to get enough credit limit on their own cards (if they even have one). Now of course, a very clear T&E policy should still be in place so that they know what they can't do with those corporate cards, but they will usually understand and concur because, apart from a few exceptions, they are the ethical ones.

Didler, being in audit and being a CFO, I completely understand and have experienced the points (abuse, difficulty in managing, etc) raised in this thread. What I do NOT agree with is the recourse or what has become the NORM (as evidenced by the responses) which is the use of employee personal resources (as a company policy) for company convenience. What started as an accommodation by the employee has turned to a responsibility for the employee. Some would argue that the employee also benefits (points) from this transaction. However, the point I am making is that the use of an employee personal credit card/limit (or any of his personal resources) is the EMPLOYEE's decision/discretion NOT the company's. Is the risk (personally or co-liable) worth it for the employee? That is the employee's decision.

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